Deal Near for ‘Hobbit’ Films in 3-D

By MICHAEL CIEPLY
The New York Times
http://www.nytimes.com
Published: October 1, 2010

LOS ANGELES — “The Hobbit” is almost out of movie jail.

Peter Jackson will direct the two-film “Hobbit” series if production begins soon.
After months of negotiation and delay, Warner Brothers and Metro-Goldwyn-Mayer are on the verge of an agreement that would allow the director Peter Jackson to begin shooting a two-part version of J. R. R. Tolkien’s “Hobbit” early next year.

Barring further hitches — and there have been many, as the studios wrestled with their dual ownership of the project over the last year — a financial deal should be in place over the next few days, according to several people who have been involved in the bargaining. They spoke on the condition of anonymity, citing company policies, confidentiality requirements and the delicate nature of the dealings.

The long-anticipated “Hobbit” films amount to an extension of the hugely lucrative “Lord of the Rings” franchise, which generated about $3 billion in revenue at the worldwide box office and enormous home video revenue for New Line Cinema, now a Warner unit. The films are to be made in 3-D. That is a shift from when the project was conceived. In the dimly remembered recesses of, oh, 2009, people involved with the two-movie version of the Tolkien book, then to be directed by Guillermo del Toro, insisted that 2-D screen technology was just right for a pair of movies that were viewed as being a little more intimate than their sweeping “Lord of the Rings” precursors. Then came “Avatar,” “Alice in Wonderland” and even the much-maligned “Clash of the Titans”— one film after another proving that viewers would pay a premium for 3-D.

For MGM, a deal that finally lets the “Hobbit” films proceed would lock in badly needed revenue as the company proceeds with a restructuring that is still far from resolved. For Warner, it means new tent-pole fantasy films just as the company is winding down its long-running “Harry Potter” series. And executives at both companies would be relieved of the building anxiety over delays that had threatened to kill the films, at least for the foreseeable future, if they could not be started by early next year.

Mr. Jackson, who is a producer and writer of the two “Hobbit” films, agreed also to become their director after Mr. del Toro left the project earlier this year, citing the delays. Mr. Jackson’s agreement to direct the movies has been in place but hasn’t formally closed because it depends on the studios’ willingness to begin production soon, according to people briefed on his status.

The first “Hobbit” film is expected to be released in mid-December 2012, the second a year later. Mr. Jackson has said he can direct the films only if those release dates can be met.

It remained unclear how Warner and MGM planned to apportion the financing of the project. They have owned it in a 50-50 arrangement, but by longstanding agreement, New Line has been in charge of production decisions, subject to some approvals by MGM.

Under several possible financing options that were considered, Warner was expected to put up all or most of the cash — Mr. Jackson has vaguely pegged the investment in the hundreds of millions of dollars in a public statement — either by lending money to MGM or buying out its interest, perhaps leaving it with a royalty or other payments. MGM’s rights have included foreign distribution of the film, and as recently as this week questions remained about how that would ultimately be handled.

Press officials for MGM, Warner, New Line and Mr. Jackson all declined to comment.

As Warner and MGM tried for months to reach terms, they were stalled by Warner’s fear of shouldering disproportionate risk while giving Warner’s partner too large a stake in possible success, and by the difficulty of persuading MGM’s myriad creditors to sign off on a deal even as they were trying to find a buyer or otherwise retool the studio. With more than $4 billion in debt, MGM has virtually ceased operating, and it faces the possibility of a bankruptcy proceeding as part of a reorganization that some of its stakeholders are now predicting may come by January.

Over the last week, Mr. Jackson and his fellow producers issued a casting call for undersize performers to play roles as hobbits in New Zealand, even as a union dispute threatened to derail the production before it had a green light.

A New Zealand union backed by Australia’s Media Entertainment and Arts Alliance has sought to represent actors on the “Hobbit” films, and a coalition of international unions, including the Screen Actors Guild, advised members not to work on the movies because of the dispute. But New Zealand officials this week advised the producers that they could not legally bargain with its actors collectively under the country’s law, which restricts such dealings with independent contractors.

Warner, New Line and MGM said publicly that they would consider moving the films to another location, perhaps in Eastern Europe, if the dispute was not resolved. People involved with the films said Friday that they expected a resolution to the union dispute imminently.

Officials for the Screen Actors Guild and the American Federation of Television and Radio Artists declined to comment, and a spokesman for the Australian alliance did not respond to an e-mail query.

Roger Birnbaum and Gary Barber, partners in Spyglass Entertainment, who have already agreed in principal to manage MGM if its restructuring can be completed, were instrumental in getting the “Hobbit” deal on track.

Within Warner, a long-awaited deal to begin the “Hobbit” films would be a coup for Kevin Tsujihara, the home video president who has been negotiating for MGM, and for Toby Emmerich, the New Line president who oversaw reorganization of his studio after it was absorbed into Warner Brothers.

Mr. Tsujihara has been deeply involved in MGM’s financial drama, as the Warner executive who organized a $1.5 billion bid to acquire MGM. He was recently named to the studio’s newly created office of the president, along with Jeff Robinov, the movie group chief, and Bruce Rosenblum, the president of the television group.

It has been nearly seven years since the release of “The Lord of the Rings: The Return of the King,” which was the last of three films in the “Rings” cycle. Mr. Jackson directed the movie, which took in about $1.1 billion at the worldwide box office and swept a clutch of Oscars, including one for best picture, in 2004.

A version of this article appeared in print on October 2, 2010, on page B1 of the New York edition.